The South African rail freight operator has failed to secure an agreement with a Chinese supplier of locomotives that would have helped it repair wagons, procure equipment and increase capacity on its routes.
The state Transnet SOC Ltd. announced in a statement that it had reached a “dead end” with a local unit of CRRC Corp. that was unwilling to cooperate with South African authorities. The ailing freight company plans to open a tender inviting any “eligible original equipment manufacturer to step in to rehabilitate the inoperable Chinese locomotives,” the Jan. 12 statement said.
Miners, including Thungela Resources Ltd., the country’s largest exporter of coal to be burned in power plants, have been unable to increase sales due to railroad shortages. Transnet does not have enough railroad cars and is often plagued by sabotage and theft. The search for new suppliers could help the company salvage some of the locomotives it bought from CRRC but which are now idle due to a lack of spare parts.
Transnet had reached a definitive agreement with the Chinese supplier in November 2022 which would have resulted in CRRC overhauling 161 locomotives, repaying some funds and delivering the remaining 99 locomotives at an adjusted price.
The locomotives are key to increasing capacity on Transnet’s North, Northeast and Cape Corridors, it said. Companies like Thungela, Exxaro Resources Ltd. and other coal producers have resorted to trucks to haul their produce from vast inland fields in eastern Mpumalanga province to ports.
The ongoing shortage of locomotives at Transnet will impact profits at Thungela and Exxaro, analysts at RMB Morgan Stanley, including Brian Morgan, said in a note to clients. “Beyond coal producers, we see downside risk to iron ore and manganese volumes with the possibility of locomotives on these routes being diverted to the coal route.”
The Chinese company must normalize its relationship with South Africa’s financial service and central bank to operate in the country, Transnet said.
Transnet had a difficult relationship with CRRC. When the South African company tried to cancel a 54 billion rand ($3.2 billion) deal to buy up to 1,064 locomotives from the Chinese company and two other suppliers, CRRC hit back by withholding spare parts, which forced Transnet to withdraw more than 300 locomotives from service.
